How to Cancel a Credit Card in Canada

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Have you wondered how to cancel a credit card in Canada? You would think the process would be easy, but closing your credit card account is more complicated than it needs to be. Not only do you need to wait on hold before someone picks up, but you’ll also likely have to go through multiple people before your card gets cancelled.

Even though you might be ready to cancel right now, there are a few steps you’ll want to take first. There are balances to be paid and points to cash in. Here’s how to cancel a credit card in Canada.

How to cancel a credit card in Canada

Technically speaking, you can call your credit card company and cancel your credit card at any moment, but there is a step-by-step process you should follow so you don’t miss out on anything.

  • Cancel recurring payments – Make sure you switch any automatic payments/purchases to another credit card before you cancel. By doing this, you’ll ensure this no disruption to your service or non payments on your account.
  • Pay off your balance – You can only cancel a credit card if you don’t have a balance remaining. If you have a negative balance (as in, you’ve overpaid or recently got a refund), you can request the credit card provider to mail you a cheque.
  • Redeem your points – Whenever you cancel a credit card, you’ll lose any points that are currently outstanding – Try your best to transfer those points out or redeem them for gift cards or a statement credit.
  • Call your credit card provider – Once you’ve done all of the above, you need to call your credit card provider’s customer service and let them know you want to cancel your card. They may transfer you to another department to finish the process.
  • Get confirmation – Your credit card provider should send you a confirmation by mail that your credit card has been closed. If you haven’t done so already, cut up your card.
  • Check your credit report – Even though you may have already received a paper confirmation that your account has been closed, you may want to check with TransUnion and Equifax to double confirm. Note that it may take 30 days before the credit bureaus are alerted.

Once you’ve cancelled your card, you should get a written confirmation such as a cancellation letter stating that your credit card balance is zero and the account closure is complete. That said, be sure to double check any automatic payments even after you’ve cancelled them. There’s always a possibility that the switch wasn’t done properly.

How to use your points before cancelling your card

If you have a cash back credit card, the terms and conditions usually say that you’ll be sent a cheque for the outstanding balance when you close your account in good standing. However, with travel rewards credit cards, it can be a bit more complicated.

Let’s say you have a co-branded credit card such as an Aeroplan credit card. Since your points are tied to the loyalty program and not the credit card provider, you wouldn’t lose your points. That said, your points typically only post when you get your statement, so don’t cancel until you see your points in your account.

On the other hand, if your points are tied to your credit card provider, you may need to get creative. American Express Membership Rewards and RBC Rewards have airline partners that can transfer your points to, so that makes things easy. However, programs such as TD Rewards and BMO Rewards don’t have any partners, so you’ll need to use your points before cancelling. The easiest way to do this is to redeem your points for gift cards or a statement credit.

Once you’ve drained your points, you can cancel your credit card without much concern.

Can you cancel a credit card online?

Unfortunately, no. Most credit card providers do not allow you to cancel your card online. While this may sound absurd, it’s in place for several reasons. First, they want to ensure you don’t have a balance before you cancel (not that they couldn’t automate that). Second, they want an opportunity to try and convince you to stick with their service. This is really no different from any service provider. They want to keep your business.

Even though this is annoying, you could try and use it to your advantage. Many people cancel their credit cards because they’re not getting enough benefits for the annual fee anymore. When you call to cancel, you’re put on the phone with a customer service representative that may have the power to give you an incentive to stay. For example, you could ask for some additional points to say. Once the formal offer is made, you must decide if it’s worth it. If it’s not, then cancel your card.

When to cancel a credit card

There’s no formal timetable when it comes to cancelling your credit card. That said, it’s obviously beneficial to do so before your annual fee posts. This way, you’re not paying a yearly fee for something you just cancelled.

That said, even if your annual fee has already been posted, you could ask for a rebate for the difference. For example, let’s say your annual fee is $120, and you’re cancelling after two months. Your credit card provider might be willing to refund you $100. This doesn’t always happen, but it’s possible.

Does cancelling a credit card affect your credit score?

Cancelling a credit card could hurt your credit score, but it depends on your situation. Three main factors could affect your credit score when cancelling your credit card.

  • Credit utilization ratio – Part of your credit score is determined by your credit utilization rate. That’s the amount of credit you’re using relative to all the total available credit you have access to. As a general rule, you want to keep your utilization ratio under 30%. If you were to cancel a credit card, you’d be getting rid of some of your credit. That could increase your utilization ratio.
  • Credit history – Part of your credit score is determined by the length of your credit history. If you’re planning to cancel your oldest credit card, you could be negatively affected if your other credit cards are relatively new.
  • Types of credit – Although it plays a minor role when determining your credit score, the types of credit you have access to can matter. For example, if you cancel your only credit card, the credit bureaus will have to rely on your other credit accounts to determine your score. Having a credit mix is helpful.

Don’t overthink your credit score. If you have a reason to cancel your credit card, you should probably do it. That said, if it’s your oldest credit card, you might be better off switching it to a no fee card so you can put it in your closet. This way, nothing will happen to your credit score. It’ll just be a card you have that you never use.

Can you cancel a credit card you just opened?

It is possible to cancel a credit card you just opened, but note that the credit score hit you took when opening the account will stay in place. Also, the credit card issuer probably won’t be impressed if you’ve already received the welcome bonus and want to cancel immediately. They could potentially flag your account that prevents you from getting future bonuses or even being approved.

How to cancel a credit card without hurting your credit

There is one method to cancel your credit card without hurting your credit. When you switch credit cards, nothing happens to your credit score. This is only possible with some credit card providers, and you can usually only switch to a few select cards within their portfolio. 

For example, let’s say you have a premium cash back credit card with a bank. You could potentially downgrade to a no fee cash back credit card. You’re technically not cancelling your credit card, but you’re getting a new one without affecting your credit score.

Switching credit cards may seem like an odd strategy, but it can be quite effective for people who want to keep getting welcome bonuses without applying for new cards.

Is it worth cancelling a credit card to open a new one?

Getting a new credit card after cancelling an old one is a perfectly reasonable tactic. Many people do this when they don’t want too many credit cards. Basically, they’d be using a one-in, one-out policy. Having multiple open accounts isn’t a bad thing. Some people just find it hard to manage.

If you’re getting a mortgage, some lenders may look at your length of credit history and determine you currently have too much credit available. One solution would be to cancel one of your credit cards. Once you have your mortgage and have made some payments, you could apply for a new credit card (if you wanted access).

There are also some practical reasons for cancelling a credit card and opening a new one. Let’s say you’re getting a divorce from your spouse. Cancelling your joint card and then getting individual ones is the logical thing to do. Alternatively, a better card might be available, such as a balance transfer credit card with a lower interest rate.

Knowing how to cancel a credit card seems easy, but there are a few steps and considerations before you do so. Once you’ve closed your account, you can decide your next steps.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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